• We previously highlighted $33 million of suspect NON-MEDICAL insurance payments that flowed from Triple-S to related party San Jorge Children’s Hospital (SJCH) – we now have unearthed additional information that suggests these payments should have triggered an independent fraud investigation, particularly in light of public corruption allegations against Triple-S’s Chairman
  • In addition to serving as Chairman of Triple-S and Chief Medical Officer of SJCH, Dr. Clavell is also Chief Executive of Centro Comprensivo De Cancer (“CCC”), a controversial publicly funded project that has been subjected to allegations of long delays, questionable contracts, extravagant spending, and employee accusations of misappropriation and financial irregularities (Telemundo 1, Telemundo 2)
  • In a September 2019 amended complaint, at least one former CCC employee (LAWSUIT HERE) specifically accused Dr. Clavell himself of engaging in corrupt behavior and misappropriating public funds, including allegedly directing construction payments to a bankrupt entity that was not qualified to receive public money…the same whistleblower claims that the FBI contacted her requesting information on April 6, 2019 and then interviewed Dr. Clavell four days later
  • Triple-S did NOT disclose any details (or even the existence) of its related party dealings with CCC in its SEC filings despite the fact that media reports claim CCC’s first formal insurance contract was with Triple-S and was inked soon after a Telemundo exposé on CCC. Even Puerto Rico’s Health Department regulators have questioned how Clavell could simultaneously serve as Chairman of Triple-S and CEO of CCC while the two companies were in the midst of negotiations
  • Dr. Clavell is Chairman of Triple-S and his signature shows up front and center on the company’s ethics policy – in our view, the company therefore has an obligation to provide the market with clarity on Clavell’s dealings with CCC and Triple-S as well as better disclosures on the status and nature of any law enforcement probe into Clavell’s dealings at CCC
  • As a reminder, Dr. Clavell is also Chief Medical Officer and President of the Board of San Jorge Children’s Hospital (SJCH) which received $33 million in insurance payments from Triple-S in 2017/18 combined (with $21 million of that in 2018 and $12 million of that in 2017)
  • We have now spoken with two sources who were intimately familiar with the operations of SJCH prior to and immediately following Hurricane Maria. One indicated that physical damage to SJCH was in the ~$1 million range and both indicated that SJCH was fully operational post-Maria, with occasional diesel outages that were quickly cured – numerous publicly available reports from the post-Maria era corroborate these accounts
  • These combined accounts call into question how Triple-S could have possibly justified paying out $33 million of non-medical insurance claims to SJCH
  • In light of the serious allegations against Dr. Clavell with respect to CCC, Triple-S’s dealings with lobbyist Elias Sanchez, and our findings that $33 million of insurance payments to SJCH do not make sense in light of the hospital’s high functioning status and lack of material damage post-Maria, it is time that the Audit Committee orders a legitimate third party fraud investigation and discloses the identity of the law firm handling the Wolf Popper investigation


The author is short shares of GTS (“the issuer”).  The author of this report also has derivatives positions in the issuer.  Use of this report is limited by the Terms of Use on https://friendlybearresearch.com/terms-of-service/.  You should carefully review the Terms of Service prior to reading this report. All information for this article was derived from publicly available information. Investors are encouraged to conduct their own due diligence into these factors. This article represents the opinion of the author as of the date of this article. The information set forth in this article does not constitute a recommendation to buy or sell any security. This article contains certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential,” “outlook,” “forecast,” “plan” and other similar terms. All are subject to various factors, any or all of which could cause actual events to differ materially from projected events. This article is based upon information reasonably available to the author and obtained from sources the author believes to be reliable; however, such information and sources cannot be guaranteed as to their accuracy or completeness. This article reflects the author’s opinion at the time of publication. The author makes no representation as to the accuracy or completeness of the information set forth in this article and undertakes no duty to update its contents. The author may also cover his/her short position at any point in time without providing notice. The author may also transact in equity options of the issuer at any point in time without providing notice.  The author encourages all readers to do their own due diligence. You should assume that Dr. Luis Clavell-Rodriguez vigorously denies all allegations made against him by former/current CCC employees, in media reports referenced in this article, and in any lawsuits referenced in this article.

Since our first reports, Triple-S keeps digging itself into deeper regulatory hot water. After issuing a materially false press release on 9/24/19, we have now confirmed that Triple-S’s management team and outsourced IR firm (ICR) have held private calls with investors in which company representatives have admitted that the 9/24/19 press release presented an incorrect volume of post-2Q19 litigation. The fact that the company is holding such calls is remarkable given that the company stated on 9/24/19 that it “has no intention to further update its disclosures until its next earnings announcement”.

Triple-S should have be more than sophisticated enough to find electronic lawsuits filed against the company, thereby implying that either a) Triple-S knowingly hid lawsuits from the market, or b) has such weak internal controls that it was not able to conduct a comprehensive search for lawsuits. If the company deemed it material enough to disclose the volume of litigation against its P&C sub on 9/24/19, then it surely has an obligation to provide a market-wide update on its current position rather than through selective disclosure. We have run the fact pattern by an SEC expert who indicated that the company’s private phone calls may constitute a Reg FD violation. However, Reg FD is likely the smallest of the company’s problems.

Whistleblower Complaint Against Dr. Clavell (Chairman of Triple-S) Alone Warrants Independent Investigation

We recently discovered an amended whistleblower complaint – filed on September 9, 2019 – that claims Triple-S’s Chairman (Dr. Clavell-Rodriguez) engaged in highly problematic conduct as CEO of Centro Comprensivo de Cancer (“CCC”), including retaliating against employees who refused to break the law. According to his Triple-S biography, Dr. Clavell has been CEO of CCC since 2015. He has been Chairman of Triple-S since 2006. Therefore, he has simultaneously served as CEO of CCC and Chairman of Triple-S throughout his CCC tenure.

The CCC hospital has been the subject of public scrutiny. In fact, the project is so notorious that Telemundo hosted televised specials with employees of CCC in which some employees of CCC publicly claimed that they saw pervasive misappropriation and financial irregularities at CCC. Reporter Valeria Collazo has even claimed the employees who reported wrongdoing on air were fired. A summary of some of the issues the CCC employees surfaced can be found below:

Source: Google translation of Metro PR story

The whistleblower complaint against Clavell paints a picture of a completely inappropriate tone at the top and highly toxic culture at CCC. Key excerpts from the complaint are below:

Source: 3:19-cv-01560-ADC, Dkt #17

Another troubling excerpt is pasted below:

Source: 3:19-cv-01560-ADC, Dkt #17

In 2018, health regulators held hearings that included Dr. Clavell, in which they asked him how he could simultaneously serve as CEO of CCC while serving as Chairman of Triple-S given the obvious conflict of interest. Notably, due to the long delays, CCC has had a hard time ramping and securing insurance agreements. We find it troubling that Triple-S was the first insurer that appears to have established an agreement with CCC given Clavell’s obvious conflict of interest. It is even more troubling that media reports suggest the Triple-S/CCC deal was inked soon after public allegations surfaced about irregularities at CCC. As a result of a May 2018 Telemundo special, Clavell and CCC were the focus of great scrutiny.

It just so happens that Triple-S, the company he chairs, signed an insurance agreement with CCC around or before July 17, 2018, soon after Clavell’s CCC issues surfaced in the Telemundo special. Despite these agreements, Triple-S did not disclose any payments or relationship between CCC and Triple-S in its related party disclosures for YE2018. It is certainly possible that the payments did not exceed $120,000 (the materiality threshold for related party deals), but the timing and nature of the relationship alone warrant disclosure in our view.

The whistleblower also claims that the FBI contacted her in connection with her complaint and then subsequently interviewed Dr. Clavell:

Source: 3:19-cv-01560-ADC, Dkt #17

In our view, it is high time Triple-S starts disclosing more to the market about any law enforcement investigations pertaining to its Directors and/or Officers.

We Believe a Legitimate Third Party Fraud Investigation Is Required on the San Jorge Claim

Now we revisit the San Jorge hospital claim that we first profiled some weeks ago.

Dr. Clavell is a busy man. He drew public ire for his $300,000 salary for his part-time work as CEO of CCC. He also draws over $300,000 in annual salary (~200k cash / ~100k stock) from Triple-S in his role as Chairman of the Board.

But in addition to those two roles, he also serves as Chief Medical Officer of San Jorge Children’s Hospital (SJCH).

In proxy filings we already covered previously, Triple-S disclosed $12 million in insurance payments to San Jorge Children’s Hospital in 2017 and $21 million of insurance payments in 2018. These figures were demonstrably higher than 2015-16 levels. Notably, the company reports a separate legal entity that received medical claims from Triple-S – San Jorge Children’s Medical Specialties PSC (as opposed to San Jorge Children’s Hospital which was the recipient of the $33 million in payments). The dollars that flowed to the healthcare entity are much smaller in magnitude.

Source: DEF 14A

Given that SJCH received these extremely high payments of $33 million in 2017/18, and given that the payments were apparently not related to medical claims, it is reasonable to infer these payments in some way are related to Maria claims (Maria hit September 2017).

Again, we are certainly proponents of making timely insurance payments to a children’s hospital as we have previously stated. We also think SJCH is a very good hospital with a strong reputation in the Puerto Rican market. We just view this specific transaction as troubling in light of our findings and whistleblower allegations against Triple-S’s Chairman with respect to the other hospital he runs – CCC.

Here is the problem. We spoke with two individuals who worked at SJCH both immediately prior to and immediately following Hurricane Maria.

Both indicated that physical damage to SJCH was relatively limited and that the biggest issue facing the hospital after the hurricane was a shortage of diesel fuel

The more operationally knowledgeable of our two sources specifically indicated physical damage was in the $1 million range and provided us with an itemized list of damage to the property to bridge to the $1 million figure.

Public reports substantiate the accounts we heard from these sources. On September 20, 2017 (immediately after the hurricane), an article in NPR appeared that made it clear that San Jorge was fully operational:

The hospital has been without power since 2 o’clock in the morning. It has been running with a power generator. The power generator is working fine. At this point, we have about 60 percent occupancy at the hospital. All patients are doing well. All employees are doing well. We have some damages to the medical office building. The elevator went out and got some water. And so far, the hospital is working as normal as possible all things considered at this point.

Domingo Cruz Vivaldi, Administrator of the San Jorge Children’s Hospital in Puerto Rico – we edited the transcription above because NPR did not capture the words “medical office” before building

The interviewer went on to ask if the hospital is “ready to take in a lot more patients” to which the Administrator answered:

Yes. We have a prepared plan, and we have employees that will rotate. And we have a supply of diesel. We have supply of food. So we are OK at this time to take care of patients. Really our only concern short-term is having power back because we can only do emergency surgeries, and we cannot do anything really elective.

Domingo Cruz Vivaldi, Administrator of the San Jorge Children’s Hospital in Puerto Rico – we edited the transcription above because NPR did not capture the word “diesel” after “supply of”

Two days later, on September 22, 2017, it was still clear that SJCH was in better condition than many other hospitals on the island. This story indicates that after the power went out, the hospital switched to its large backup generator and was still able to take care of patients. The hospital remained operable, with its only significant operational issue being diesel availability for the backup generator.

SJCH was also never forced to shut down post-Maria – it appears that it did run out of diesel for periods of time but ultimately remained operational throughout the post-hurricane period. The excerpt from the article below provides more color on SJCH as of September 28, 2017, about a week after Maria had hit:

A week after Maria, many hospitals are still shut down and the few that are open are operating with just emergency generator power. With a scarcity of fuel, dwindling supplies and disruptions to their employees’ lives, hospitals say they are in crisis, laboring to provide care at a time when it’s needed most.

Maria didn’t force San Jorge to close its doors, though the hospital is seeing an increasing number of patients with problems related to Hurricane Maria. “We have seen some broken bones and cuts” says hospital vice president Domingo Cruz Vivaldi, “and then because of the conditions, we have unstable asthma patients, diabetes patients.” Residents aren’t getting preventive medicine at this time, he says.

Article can be found here

From this information we can infer that physical damage to Maria was clearly not severe enough to impact hospital operations but instead it was a shortage of diesel that impacted operations (which is obviously a factor that impacted all hospitals and entities across the island given the power grid went down). One article did claim that SJCH elected to transfer/release half its patients out of the hospital for a period of time when it was low on diesel but by all accounts – including from our sources – the hospital survived the hurricane largely unscathed outside of power issues.

It is also clear that business was at most only modestly interrupted at San Jorge. In fact, one could easily argue that because San Jorge was one of the few fully functioning hospitals on the island, it actually saw an uptick in utilization rates in the post-Maria period. The NPR interview from September 20, 2017 that we found certainly suggested the hospital expected to see an uptick in patients, which we think would make any large business interruption claim challenging to justify.

We therefore question how the hospital could have received $33 million in non-medical insurance payments in 2017-18. On the physical damage side it clearly does not pass the smell test. And on the business interruption side – claims that we note tend to be far murkier and subjective to justify – it is hard to see how the hospital could have qualified for a payment of that magnitude – especially given that Triple-S delayed and deferred paying the Ryder claim in full all the way until mid-2019. Ryder was far more devastated than SJCH and had major structural damage requiring significant reconstruction.


Without the benefit of the adjuster report on the SJCH claim, we have no way of verifying whether or not it was improper. Given Triple-S denied and stalled on so many other legitimate post-Maria claims, we think it has an obligation to provide the adjuster’s report relating to the related party SJCH claim publicly.

As we read the CCC whistleblower complaint against Dr. Clavell, there was one specific excerpt that piqued our interest and that strongly suggests the Audit Committee has an obligation to at the very least commission an investigation into the SJCH insurance payments as well as the commercial arrangements between CCC and Triple-S:

Source: 3:19-cv-01560-ADC, Dkt #17

The whistleblower was highly detailed in her allegations in her lawsuit, which we believe lends additional credibility to her allegations. Her allegation above – that Dr. Clavell used the hurricane as an excuse to take control of CCC financial matters – is therefore highly noteworthy in light of the SJCH claim at Triple-S. These allegations – in conjunction with other data points that suggest irregularities with the SJCH claim – warrant a proper third-party fraud investigation through a non-conflicted and publicly disclosed law firm.

Until that time, we believe Triple-S’s Audit Committee is digging itself into a deeper regulatory hole.